Answer the Questions Below

question 61

Essay

Answer the questions below:
(A)Some argue that Japan's saving rate is too high. Suppose all Japanese citizens decide to save at a lower rate. Show what happens in this case in the saving and investment diagram where the S/Y curve shifts.
(B)Now show the same situation in the C/Y, I/Y, and X/Y diagrams. Which curve shifts? If the government share of GDP does not change, then what must happen to interest rates? Explain how this affects the four shares.
(C)Suppose that when the Japanese citizens began saving at a lower rate, the government reduced its level of spending, and the government share of GDP fell. Illustrate the effect on the interest rate using the saving-investment approach and the four-diagram approach in parts (A) and (B). What happens to the four shares of GDP?

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Definitions:

Levels-of-processing Model

A theory suggesting that memory retention is directly related to the depth of mental processing of information, ranging from shallow to deep.

Method of Savings

A measure of retention in which the difference between the number of repetitions originally required to learn a list and the number of repetitions required to relearn the list after a certain amount of time has elapsed is calculated.

Ebbinghaus

A psychologist best known for his research on memory, particularly for discovering the forgetting curve and the spacing effect.

Anterograde Amnesia

Failure to remember events that occurred after physical trauma because of the effects of the trauma.